Finance Videos

May 21, 2014 | 02:26

Will record investment in Africa last?

May 21 - Nestle Nigeria is to invest $70 million dollars to grow its food business this year. As Hayley Platt reports, record amounts of foreign investment are being ploughed into Africa, despite the increasing challenges.

TRANSCRIPT +

There's nothing new about Nigeria for Nestle.
The food giant set up in Lagos in 1961 and operates a food and beverages division.
But like many it's looking to grow the business - and has just announced plans to invest another $70 million dollars in the country.
It's expanding its distribution network.
Dharnesh Gordhon is managing director of Nestle Nigeria.
(SOUNDBITE) (English) DHARNESH GORDHON, MANAGING DIRECTOR, NESTLE NIGERIA PLC, SAYING:
"Over many years we have managed to build a formidable sales structure and route to market. Ideally the strength of that is really finding local partners."
Nestle has invested $400 million in Nigeria over the past six years.
Others are now looking to follow their example.
A report this week painted a rosy picture for the continent as a whole.
Foreign investment this year is expected to reach almost $85 billion - higher than ever before.
Sovereign wealth funds, large institutional investors and multinationals are pouring money in.
They're attracted by strong economic growth and improved governance in what's being called Africa Rising.
But will it last? Michael Hewson is from CMC Markets.
SOUNDBITE: Michael Hewson, CMC Markets, saying (English):
"The flow of funds into Africa reminds me of the flow of funds into the emerging markets in Asia. At the first sign of trouble, you could be susceptible to a capital outflow. Geopolitical risk is always going to be a concern there, we've seen that with Kenya, we've seen that with Nigeria and the likelihood is that we will continue to see it."
The risks are certainly high - twin bombs claiming more than 118 lives in the Nigerian city of Jos is the latest atrocity.
But with growth in Africa expected to be 4.8% this year and 5.6% next year many prefer to look at the opportunities.
SOUNDBITE: Michael Hewson, CMC Markets, saying (English):
"Certainly the optimism about African growth prospects is warranted, but the IMF came out earlier this week and said that the Africa growth story is starting to look a little tired."
Nestle Nigeria's recent first quarter results showed profit was flat.
But it says it's still on track to triple annual sales to $2.2 billion over the next 10 years.
Its seasoning product, Maggi, already reaches 20 million Nigerian consumers every year.
The company hopes its new mobile shops will bring it - and many other food products - to parts not yet in reach.

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